PRA fees and FSCS levies for insurers: proposals for a transitional approach in 2017/18

Policy Statement 37/16 | Consultation Paper 30/16

Published on 16 December 2016

PRA fees and FSCS levies for insurers – transitional approach for 2017/18: responses to CP30/16 – PS37/16

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses and final rules for Consultation Paper (CP) 30/16 ‘PRA fees and FSCS levies for insurers: proposals for a transitional approach in 2017/18’.

The PS is relevant to insurance firms falling into the A3 (general insurance) and A4 (life insurance) fee blocks and FSCS levy classes B1 (general insurance) and C1 (life insurance), the FSCS, (for the purposes of the FSCS levy only) the Society of Lloyd’s, and policyholders.

In CP30/16, the PRA proposed transitional arrangements that would be applied to the 2017/18 PRA fee and FSCS levy years for all insurance firms subject to fee blocks A3 and A4, and FSCS levy classes B1 and C1. The proposal meant that calculations for the 2017/18 fee and FSCS levy years would be based on the last set of Solvency I data received (returns received for the relevant insurance firms’ financial year ending during 2015).

The CP also proposed that adjustments to that data would be required where an insurance business transfer under Part VII of the Financial Services and Markets Act (FSMA) (or other such transfer under Part VIII of the Friendly Societies Act 1992) had occurred between the end of a firm’s financial year ending in 2015 and 31 December 2016. As well as this, where a relevant insurance firm has gone into run-off between the end of the firm’s financial year ending in 2015 and 31 December 2016, it may optionally provide submissions of updated data on a Solvency I calculation basis for the year ending in 2016. Relevant firms would need to provide relevant data on a Solvency I basis to the FCA by 28 February 2017.

The PRA received five responses to the consultation, generally supporting the proposals. Some respondents raised suggestions and questions which are discussed in Chapter 2 of this PS. The responses have not led to any changes to the proposals in the CP.

The appendices to this PS contain the final rules for a transitional approach in 2017/18, that makes changes to the Fees and Policyholder Protection Parts of the PRA Rulebook. 

PDFPolicy Statement 37/16

Appendices

  1. PRA RULEBOOK: SOLVENCY II FIRMS, NON SOLVENCY II FIRMS, NON-AUTHORISED PERSONS: POLICYHOLDER PROTECTION INSTRUMENT 2016
  2. PDFDownload PDF
  3. PRA RULEBOOK: FEES (INSURANCE FIRMS TRANSITIONAL RULES) INSTRUMENT 2016 
  4. PDFDownload PDF

Published on 9 September 2016

PRA fees and FSCS levies for insurers: proposals for a transitional approach in 2017/18 - CP30/16

In this consultation paper (CP) the Prudential Regulation Authority (PRA) sets out proposals for a one year transitional arrangement for insurance firms’ PRA fees and Financial Services Compensation Scheme (FSCS) levies for the 2017/18 fees year.

The CP is relevant to insurance firms falling into the A3 (general insurance) and A4 (life insurance) fee blocks, FSCS levy classes B1 (general insurance) and C1 (life insurance), the FSCS (for the purposes of the SCS levy only), the Society of Lloyd’s and policyholders. This CP is in addition to the usual annual consultations of fees and the FSCS management expenses levy limit.

Currently, the Fees and Policyholder Protection Parts refer to data reported by firms in accordance with the previous ‘Solvency I’ insurance reporting regime.  Following the introduction of Solvency II and the policy for non-Directive firms (NDFs) set out in PRA Policy Statement (PS) 19/16 ‘Reporting requirements for non-Solvency II insurance firms’, the PRA needs to amend those references for firms within the scope of Solvency II and make consequential amendments for NDFs so that PRA fees and FSCS levies are calculated on the basis of data available under the new regulatory reporting requirements.

Summary of Proposals

The PRA is proposing a twelve month transitional period whereby the calculations for the 2017/18 fee and FSCS levy year, for both Directive and non-Directive firms, are based on the last set of Solvency I data received. This means that fees and levies for both the 2016/17 and 2017/18 fee years will be based on the returns received for the relevant insurance firm’s financial year ending during 2015 (‘Solvency I data’). This is data that the authorities already have, so firms will not be required to provide any new data for the 2017/18 fee and levy calculation unless an adjustment is appropriate, as described below.

The PRA also proposes to allow submissions of updated data on a Solvency I calculation basis for the year ending in 2016, where a relevant insurance firm has gone into run-off between the end of the firm’s financial year ending in 2015 and 31 December 2016. Such a resubmission is optional. Firms that take up the option will need to provide relevant data on a Solvency I basis to the FCA by 28 February 2017.

Response

This consultation closed on Wednesday 9 November 2016.

PDFConsultation Paper 30/16

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